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What does a 'good' divorce look like when are you dealing with the finances?

Date:12 JAN 2022

I asked clients, colleagues and an IFA specialising in divorce what they thought a ‘good’ financial settlement looked like. The common thread in their answers was not, as you might expect, that it’s about winning. A ‘good’ divorce, where the finances are concerned, is about realism and moving forward.

"A good divorce is one where the parties know the difference between what they need to get and what they want to get” - Helen Howcroft, chartered financial planner and founder of Equanimity Independent Financial Advisers.


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When it comes to financial cases, the family courts in England and Wales are more interested in what people need than what they want. The key piece of legislation on financial settlements arising from divorce (Section 25 of the Matrimonial Causes Act 1973) requires a court to consider the current and future needs of both parties – it is silent on what parties want. What you want from a settlement will be important to you and, particularly if you are able to reach a negotiated settlement, it can be taken into account but it is not mentioned in section 25.

In many cases, the starting point of the court is a 50:50 division of the assets accrued during the marriage. In cases where there has been a long marriage and where there are marital assets in excess of each party’s needs then, absent any complicating factors like pre-nuptial agreements or non-marital assets, the financial settlement may be based on a straightforward equal division. If, however, this division does not meet the needs of you, your children and your partner then your financial settlement will need to be tailored according to your respective needs.

There is no definition of ‘needs’ in the Matrimonial Causes Act: it is a deliberately flexible legal concept and it is up to individuals and their divorce team to work out what a particular person’s needs are. Helen uses various tools to help her clients work out what they have been spending and what they will need for the future. She believes, as I do, that having realistic expectations of what you need for the future makes reaching an agreed settlement far more likely. If you know what you need from a settlement it enables you to negotiate with greater clarity and focus.

"It’s never a win/win but it needs to be a least loss/ least loss. It’s about finding realistic objectives and a base from which to move forward.” – A client following the conclusion of their financial settlement.

The client who said this did not have an easy divorce but they managed, in difficult circumstances, to reach a financial settlement which they felt was fair. As they said, no party felt as though they had ‘won’ but neither did they feel like they had ‘lost’ and their family relationships were preserved.

This client’s suggestions for how to achieve a fair settlement are set out below and they make some excellent points:

  • Try and avoid getting side-tracked by unreasonable obsessions
    • For example: If a large proportion of your marital wealth is tied up in the family home, it may not be possible for either of you to keep it.
  • Keep your realistic objectives at the forefront of your mind at all times
    • This is an extremely emotional process but the more you can focus on what you want to achieve, and try to take the emotion out of it, the more likely you are to reach a compromise on the points which are most important to each of you.
  • Focus on the future
    • Your aim is to create a settlement which forms a solid basis for your future. Living in the past, or hoping for the future you previously planned, isn’t going to move you forward.

"A ‘good’ divorce is one which enables you to move forward." - Kingsley Napley family team

My colleagues and I understand what we, and you, can and can’t do within the confines of the law in England and Wales. We know that the aim of the family courts is not to create a winner or a loser but to balance competing demands in extremely difficult scenarios. We also know that obtaining a settlement which allows you to move forward, not to remain stuck in the divorce, is what many clients prize most highly.

When dealing with financial cases, family courts in England and Wales may form a view on the character of the parties involved and what each says about the marriage. Judges may share some of those views in court if they feel they are relevant to the financial case. But their principal aim is not to redress wrongs you or your partner feel you have suffered during your marriage. The role of the court is to apply the relevant legal principles and work out what you should each walk away with. That is the court’s end point: what you each have to take forward.

There are lots of ways to reach a financial settlement in England. You can go to court or you can use one of many alternative dispute resolution (ADR) methods such as: mediation; collaborative law; early neutral evaluations; negotiations through solicitors; private court hearings or arbitration. These processes are all very different but they all use the same law and apply the same legal principles. They are all focused on what you walk away with.

Your future is the court’s focus and so it has to be ours. But whilst the court’s focus is financial, ours is rather broader. We have all seen clients stuck in a divorce which never seems to end and we do all we can to extract clients from that and enable them to move forward.

Summary

"Focus on your future life, not a percentage share. If there is a settlement that meets your needs then it’s a good one."

This is another comment from Helen Howcroft on what a ‘good’ divorce looks like from a financial perspective.

Although some people may want to pursue what they see as their best possible settlement, something I completely understand, it is important to appreciate that family law in England and Wales is discretionary. The idea of an absolute best figure to aim for is, therefore, something of an illusion. Unless you are dealing with a straightforward sharing case, a firmer basis for your future is to work out what you and your family need and allow that to inform your case. This is the most effective way to prepare a smart, focused case which provides you with the best possible start to your future life.

This article was first published by Kingsley Napley and is reproduced with permission.

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